26 July 2004 - Reviewing approaches to understanding the link between childcare use and mothers’ employment
Research published today reviews approaches which could be used to improve our understanding of the link between childcare use and mothers’ employment. The report considers the merits of three different approaches to understanding the link between childcare supply and mothers’ employment. These are: building on existing programme evaluations, natural experiments and statistical modelling. The paper briefly discusses how the methods could be applied in the UK. The key findings are:
In terms of the appropriate theoretical model for thinking about childcare demand and labour supply:
- A sensible model should recognise that mothers demand childcare not just to free up time so that they can work but also for the benefits childcare brings to their children.
- Such a model has few unambiguous predictions, underlying the importance of empirical estimation.
- Many US studies assume that the price of formal childcare adjusts to ensure that the childcare market is in equilibrium. Such a framework denies the possibility of excess demand for childcare, which is perceived to exist in the UK.
- It is important to know whether there is excess demand in the childcare market, but discovering that parents would use more childcare if they could afford it does not tell us that the market for childcare operates inefficiently.
In terms of the use of programme evaluations and natural experiments:
- Few evaluations of interventions that aim to solely increase access to childcare exist.
- The evaluation of the Neighbourhood Nursery Initiative might tell us something about the impact of this particular intervention on mothers’ employment and childcare use but it is unlikely the results can be generalised.
- Natural experimental approaches could be used to explore the effects of independent variations in provision of childcare places from LEA to LEA across England, though such a study would require additional data collection.
In terms of the use of structural or reduced form models:
- The majority of studies that have investigated the link between mothers’ employment and childcare use have attempted to estimate the elasticity of mothers’ employment with respect to the price of childcare using a reduced form approach. This is a useful parameter for policy analysis but there are several problems with this approach.
- Structural models offer a more comprehensive treatment of the problem than reduced form models, but rely on a greater number of assumptions and are more complicated.
- Both approaches tell us only about the demand side of the childcare market and not how providers react to demand changes. To explore how changes in the supply of childcare places affect mothers’ employment we need to know the price elasticity of childcare supply, which is additional information.
- In order to estimate reliable quality-constant childcare prices, information from a survey of suppliers, with explicit information on attributes that parents are like to value, is required.
- There are a number of econometric and data problems that arise when estimating reduced form and structural models and the available solutions are complex, in some cases controversial and require that a lot of data be collected.
Notes for editors
- ‘Reviewing Approaches to Understanding the Link between Childcare Use and Mothers’ Employment’ by Mike Brewer and Gillian Paull, DWP Working Paper (no. 14) is published on 26 July. A summary and copy of the report is available on the DWP website: http//www.dwp.gov.uk/asd/asd5
- Mike Brewer is Programme Director (Direct Tax and Welfare) at the Institute for Fiscal Studies (IFS), and Gillian Paull is a Research Associate of the IFS.
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